HEDGING CROP RISK WITH YIELD INSURANCE FUTURES AND OPTIONS

This paper analyses the optimal hedging decisions for risk-averse producers facing crop risk, assuming crop yield insurance futures and options can be used. The first-best optimal hedge requires a futures position or an option position proportionate to the individual beta depending on whether the financial markets are perceived unbiased or biased. Using yield data for a sample of wheat producers in France, the producers' hedge ratios are derived. These new hedging instruments are more effective to reduce farm yield variability than the individual yield contracts, except if the individual yield guarantee is at least equal to the individual average yield.


Issue Date:
1999
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/21672
Total Pages:
13
Series Statement:
Selected Paper




 Record created 2017-04-01, last modified 2017-08-24

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